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Underwater after a bankruptcy 3.5 years ago. Can I refinance?

Q: Can I find someone to refinance? We filed bankruptcy 3.5 years ago after a failed business. We were never late and never missed a payment on our mortgages (1st & 2nd) or our cars and did not include these in the filing. Since the filing we have paid off one of the two cars. We have an adjustable rate first mortgage that is set to adjust in 2013 - currently it is at about 6%. The second mortgage is fixed at 9.9%. Looking at both mortgages, we are slightly under water. Since the filing we have not taken out any credit at all. Is there any hope of re-financing?

A: The bad news is that the combination of your issues - being underwater and having a fairly recent bankruptcy - means finding new financing will be next to impossible. Fannie and Freddie require "credit recovery" periods after bankruptcy of up to four years, and being underwater leaves fewer options outside of a Home Affordable Refinance -- available only if your loan is owned by Fannie or Freddie in the first place. You can check with your existing first mortgage lender to see if help might be available, but it does seem unlikely at the present moment.

More help from HSH.com

  • Can we do a "cash-in" refinance?

  • How do I remove or add a name to a home loan?

    In general, the only way to remove a name from your mortgage will be to refinance or pay off the debt. This is also true when trying to add names to the mortgage. Lenders will not add nor remove names from such an obligation without the opportunity to ensure that the other borrowers have the ability to pay.
  • I'm trying to refinance a jumbo loan.

  • Is there a ten year refinance mortgage out there?

    Almost any lender that offers a fixed-rate mortgage will offer a 10-year mortgage. Mortgage rates for a 10-year mortgage usually aren't any better than the rates offered for a 15-year mortgage. That said, be sure to shop around to find a competitive rate. Getting a fixed-rate mortgage with a term as short as 10 years will save you a lot of money on interest costs.
  • Living on investment income. Can we refinance our Jumbo mortgage?

    Have you talked to your investment advisor (if you have one)? Some firms will make mortgages for clients with different rules than those you'll find in the open market.

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